In its suit, SolarCity says two of the company’s subsidiaries received smaller-than-expected grants. The company doesn’t say exactly how much funding it applied for originally, but it says the final grants issued by the Treasury Department were $8 million less than was proper under the law.

The company says it could lose millions of dollars more if the government does the same thing on all $400 million in grants it has sought.

If SolarCity’s suit is successful, other participants in the grant program might be encouraged to file cases of their own or push for higher grants on what remains of pending applications, said Morten Lund, an attorney for Stoel Rives LLP in San Diego.

A look at the Department of Treasury Section 1603 data shows that SolarCity received 27 awards across 15 states amounting to $95.6 million in cash from a long-standing tax credit for renewable-energy investment turned into a direct grant in the stimulus bill. SolarCity has applied for approximately $325 million in these stimulus grants, according to the SEC filing.

There are a few things to note here.

First, as Tim Carney of the Examinerexplained last October, SolarCity is one of the solar companies that is being investigated by the IRS after Treasury found that it ”repeatedly overstated the value of its investments, the SEC filings indicate.” Since the dollar amount of the grant is a set percentage of the value of the project, the benefit of overstating one’s value is that it leads to more taxpayers’ cash.

Third, it is worth noting that Elon Musk is a generous political donor. Why does this matter? Because it’s one thing for the government to mismanage taxpayers’ money (as it may have with 1603 payments to SolarCity); it’s another when the mismanagement happens to heavily benefit some of the administration’s large donors. Carney writes:

Musk is the paradigmatic political entrepreneur, launching businesses that seek to capitalize on government favors and lobbying clout rather than provide goods or services that consumers demand.

Musk is CEO of and the biggest investor in Tesla Motors, an electric car company that depends on stimulus money and other subsidies. He also founded Space Exploration Technologies, or SpaceX, whose primary customer is the federal government.

Musk has personally given more than $100,000 to Obama’s re-election campaign, including two gifts of more than $30,000 each to the Obama Victory Fund, which divides the money between the maximum allowable donations to the Democratic National Committee and the maximum to the Obama campaign. (Musk has also given generously to Republicans.)

Keep those max gifts in mind when Obama says he rejects donations from lobbyists.

Fourth, as Paul Chesser reported a few months ago both Telsa and SolarCity spent a lot of money lobbying Congress for the subsidies:

According to the Center for Responsive Politics, SolarCity spent $535,000 in 2009 and 2010 to lobby Congress and the Department of Energy on climate legislation, the Recovery Act, “green workforce training and development,” and provisions in various legislation “relevant to solar development.” SolarCity has sought to extend a program, due to expire at the end of 2012, that delivers to manufacturers an upfront cash grant in lieu of a 30 percent Investment Tax Credit (called the Section 1603 grant program). So far, according to DOE reports, SolarCity has received more than $66 million from that program.

Finally, as Chesser notes above, originally SolarCity applied and won a conditional commitment by the DOE to receive $344 million in 1705 loan guarantees. The 1705 loan guarantee gave us Solyndra. The rationale behind the loan guarantee is that the loan recipients wouldn’t be able to get private funding otherwise. After Solyndra collapsed, however, the program received some much needed scrutiny about the DOE loan programs and its politically connected recipients. In the end, SolarCity didn’t end up getting the DOE guarantee. Now if you have followed my writings on the 1705 loan program, you know that one of my biggest complaints with the program is that it grants loan guarantees to companies that could get private funding for their projects without the government help. So here you go: According to the Wall Street Journal, after the DOE funding fell through, the company went on to borrow the money from Bank Of America almost immediately.

Now, going back to where we started, taxpayers could be on the hook for even more cash than they have already paid out to these green-energy companies (and their very financially secure owners) if the courts decide that they were indeed eligible for much more money. The Wall Street Journal concludes:

At least one other renewable-energy developer has sued the government over stimulus grants that were smaller than requested. LCM Energy Solutions, of Dallas, sued in U.S. Federal Claims Court in May 2012 seeking $500,000 in stimulus funds. In the case, which is still pending, the company accused the Treasury Department of undervaluing its projects and underpaying stimulus grants for 18 solar-panel systems.

John Hayes, a lawyer for LCM, Energy,said it will soon be asking the court to increase several more grants it recently received. He said he is aware of other firms “who are in a similar situation. Not everybody’s filed suit yet.” The Treasury Department declined to comment on the LCM suit.

As a reminder, so far Treasury has paid over $17 billion in stimulus grants to green-energy companies.